The Real Story Behind Bitcoin Price Volatility
As some in the Bitcoin community suggest, we could see at least four Bitcoin networks or even five, and then there are overlays such as Lightning.
Our London Correspondent Nick Ayton, the ‘Sage of Shoreditch,’ has been speaking to the Bitcoin core community about the politics and power struggles that will impact SegWit decision-making.
What happens to Bitcoin holders in the weeks ahead? What will be the consequences of SegWit for the user community and what does it mean to Bitcoin as a cryptocurrency and the role of miners? Is the economic model for Bitcoin being forced to change as the investment in POW infrastructure remains significant and where are the rewards declining?
Is SegWit really about control?
This article is not intended to go into the technical of SegWit (for more information see SegWit explained). Suffice to say the big topic since Bitcoin’s increase in popularity is the underlying performance of the network, or is this nothing more than a smoke screen to that masks an inevitable power struggle as the few that hold the old values of centralisation want to control it.
Having spoken to the community, read their blogs and posts and sat in forums, from what I can make out, SegWit is a battle of wills.
It’s a fight between the independent purists that don’t want change and want to keep the network closely aligned to the original Satoshi vision, versus the move by the enterprise thinking that is looking to concentrate power (hashing power) and force decisions to improve the economic model.
SegWit is a battle that will not only challenge the very ethos of Bitcoin from the founding Nakamoto roots but may ultimately split the community into several parts.
Will SegWit make Bitcoin more vulnerable?
Against a backdrop of a huge increase in volumes and drop off in transaction processing times it will come as no surprise to learn that for an intelligent, opinionated and evangelical network of Bitcoin market participants will never agree on the future direction Bitcoin. Many were unhappy with the NYC agreement, while other hold strong views and want to stay close to the original 2008 Satoshi script.
Some including Dr. Craig Wright, believe SegWit will open the door to manipulation by mining cartels.
Let us also not forget the network remains vulnerable to 51 percent attack and is designed to make sure the economic incentives do not deliver the returns to make it worthwhile.
Craig Wright who claims to be the founding father is not alone in believing SegWit opens the door for cartels to manipulate the network using an “AnyOneCanSpend” address essentially leaving the signature (witness) blank relying on all miners to play nicely and not steal funds. He claims that self-interest will eventually override social cooperation as the network grows and the amount of larger transactions increases , and that new mining pools could come in at essentially a discount with illicit intentions.
But is there a darker side to this story as alleged co founder Alexandre Cazes of AlphaBay is found dead in a Bangkok jail, and law enforcement agencies cracking down on similar sites that use the TOR Darkweb network? However, the most significant impact is the large volume of BTC transactions have simply disappeared.
This is the main reason why the purists want to take a different path and why they feel the entire Libertarian concept behind the Bitcoin network is being highjacked. And they may have a point…
The enemy within
But then nothing in the world of Bitcoin throughout its short history has ever been straightforward or simple. For many people who use and hold Bitcoin, they may not realize the network is constantly under attack and the core developer community have to keep coming up with new ideas and ways to protect the integrity of Bitcoin and police its use.
Although the biggest attacks appear to come from the enemy within.
The politics of the miner community, in particular, is hard to fathom but also plays a significant part in the SegWit story.
For a long time concerns have been raised about the concentration in hashing power centered on the larger mining pools where the economic investment from the corporate world many believe has already distorted Bitcoin from its original path.
And it is clear SegWit will add to the debate and increase concerns for many involved driving their decisions and Bitcoi